The Chronicles Of Grant County

Federal Fuel Tax Credits For Farmers And Ranchers

Details on Federal tax credits available to farmers and ranchers for fuel used off-the-highway are found in IRS Publication 510.

Farmers and ranchers in Southwest New Mexico have the ability to get the Internal Revenue Service (IRS) to return some of the money that they've paid for fuel used on their farms and ranches.

The amounts could be modest or could be considerable, depending on the type and the amount of fuel used for farming or ranching operations.

Each time you purchase a gallon of gasoline, for example, the price you pay includes a Federal fuel tax. These taxes have been assessed for the purpose of highway construction, maintenance, and repair.

If you use that fuel for your farm or ranch operations, though, you generally don't need to pay the Federal fuel tax.

But to get that tax money back, you have to file a specific form with the Federal government – IRS Form 4136 for Credit for Federal Tax Paid. Farmers and ranchers are able to file this form with the IRS to get a credit for fuel that they used off-the-road.

This Federal tax credit is available for farmers and ranchers in Catron, Grant, Hidalgo, and Luna Counties when they purchase gasoline, undyed diesel fuel, and undyed kerosene fuel.

The specific credit amounts are 18.3 cents per gallon of gasoline, 24.3 cents per gallon of undyed diesel fuel, and 24.3 cents per gallon of undyed kerosene.

The credit is based on the number of gallons of each type of fuel used on a farm or ranch.

"A farm," according to the IRS, "includes livestock, dairy, fish, poultry, fruit, fur-bearing animals, and truck farms; orchards; plantations; ranches; nurseries; ranges; and feed yards for fattening cattle. It also includes structures such as greenhouses used primarily for the raising of agricultural or horticultural commodities..."

Credits for fuel taxes are generally available when you use the fuel to operate tractors or other equipment, when you use a car or pick-up truck to travel about your farm or ranch, to heat a structure, in the application of fertilizers and pesticides, or for some other farming or ranching purpose.

Fuel used for personal purposes – such as when you mow your home's lawn – does not qualify for credits.

You'll need to keep records documenting your usage of each type of fuel for which you're requesting credit.

IRS Form 4136 is to be filed at the same time you file your Federal income taxes.

While most Americans are required to file their Federal income tax forms by April 15 each year, some farmers and ranchers file their Federal income tax forms by March 1.

Though it's not required – farmers and ranchers can wait until April 15 like other Americans – farmers and ranchers need to file their Federal income tax forms by March 1 if they don't make one estimated Federal income tax payment by January 15. The estimated tax payment is for the taxes due for the previous year.

That estimated Federal income tax payment is required to be either the amount of the Federal income taxes due for the year prior to the previous year or 66.67% of the amount of the Federal income tax due for the previous year, whichever is the smaller amount.

For example, an estimated Federal income tax payment made on January 15, 2024, the amount would have to have been either 100% of the Federal income taxes that were due in 2022 or 66.67% of the Federal income taxes that were due for 2023.

Farmers and ranchers that had made that one estimated tax payment can then delay filing their Federal income tax forms until April 15.

In comparison, non-farmers and non-ranchers who don't work for employers that deduct taxes from regular paychecks generally are required to pay estimated Federal income taxes four times each year – one estimated tax payment for each individual quarter.

The IRS may assess interest and penalties if the estimated taxes are not paid in a timely manner or within the parameters set by the IRS.

The specific deadlines for filing Federal tax forms can vary depending on the year. In 2024, for example, since January 15 was on a Federal holiday (Dr. Martin Luther King, Jr. Day), the tax deadline for that date was extended to the next business day, January 16.

Before filing for a fuel tax credit from the IRS, you should be certain that you aren't already getting an exemption from paying the Federal fuel tax. Fuel deliveries made to your farm or ranch may already include an exemption that removes the Federal fuel tax from the invoices that you pay for those fuel deliveries. In that case, you would not be able to file for a credit for those fuel amounts because you haven't actually paid the Federal fuel tax.

Credits you receive for Federal fuel taxes are considered income by the IRS. You'll likely have to report that income when you file your Federal income tax forms the following year on IRS Schedule 3 – Additional Credits and Payments.

The IRS provides information on fuel tax credits for farmers and ranchers in the agency's Publication 510 – Excise Taxes (Including Fuel Tax Credits and Refunds), while details about estimated taxes can be found in IRS Publication 505 – Tax Withholding and Estimated Tax.

Please contact the IRS or an accountant, attorney, or another tax professional of your choice to determine whether you might be able to seek credits or refunds for the use of fuel in your farming or ranching operations, the timing to make such requests, and the forms that need to be completed to secure these fuel tax credits or refunds.

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